Gold and silver continued to tiptoe higher, in line with the dollar weakening against the euro in overnight currency trading. Gold, silver and copper split with crude oil, platinum and palladium, which all lost ground.
In early trading gold was up $2.53 to $1,645.66 and silver was up a penny to $31.61. That brings the silver/gold ratio back up to 52.
The last time the silver/gold ratio hit 52 was around the end of March and coincided with a time several of the large online dealers were offering bullion-priced silver products for $0.99 over the spot price, so I hope you took advantage of that opportunity to stock up on some silver like I did.
There is a feeling among metals analysts that gold and silver are tracking higher on speculation that the Fed will reconsider its stand on easing. Eventually the Federal Reserve will have to ease for a variety of reasons, but chairman Bernanke has been delightfully resolute thus far in not running the printing presses.
The Fed being hesitant to print money has provided retail investors with a wonderful opportunity to buy gold at a discount. If someone gave you a $50 or $100 off coupon for gold wouldn’t you use it?
Eventually the economy is going to recover and precious metals will slip into a long-term, shallow downtrend. While the economy is currently bouncing off the floor, we’re not in a strong recovery yet and there won’t be one until we see a sustainable driver for growth. Right now there isn’t any driver for growth that shows the promise of lifting the economy.
As long as growth stays weak, that means investing in equities is going to continue to be a bum deal as brokers and Wall Street execs continue to extract wealth from your 401(k) without providing any value.
With the specter of inflation still very real and continued pressure on the Fed to maintain employment with an injection of cash, I’m not seeing any reason to switch out of defensive investments just yet.
Right now I’m still liking silver. I bought some last month and may keep accumulating as long as prices stay in this range and whenever the silver/gold ratio hits a short-term peak.